Brainard v. San Diego Co-op. Ass'n

HUNT, Circuit Judge (after stating the facts as above). [1] The fact that the legal title to the San Diego stores was in the League cannot prevent a court of equity from looking into the intricacies of the manner by which title was acquired, and if it is found to be clear that a better right of true ownership is in the San Diego association^equity will convert the League into a trustee for the true owner. [2] It is not necessary to set forth evidence supporting the findings of the master, further than to say that the testimony is plain that the San Diego Co-operative Association was recognized as an entity by the Pacific Co-operative League, and that the League paid for the stores purchased in San Diego with money subscribed by the San Diego association. There is no ground for the contention that any creditor of the Pacific Co-operative League was misled into giving credit to that organization, and quite apparent is it that the creditors of the San Diego stores extended credit upon the faith of the stores being owned by San Diego people. Among circumstances throwing light upon the situation may be cited that on the largest store in San Diego was a sign reading: “This store owned by 500 families. Ask the clerk how you can join them.” The loan capital certificate showed on its face that the money was for the San Diego stores, to be used in accordance with the by-laws of the League, which, in providing for co-operation, contemplated groups of people rather than individuals. The facts that the manager of the San Diego stores was selected by the League, and that deposits in bank were made to the credit of the League, do not necessarily change the relationship of trusteeship. The funds were always deposited in trust with the League, and-while the League assumed to act and did act in payment of taxes, and, as said, took legal title to the *16 stores, it was but a trustee for those from whom the moneys came. Byrne v. McGrath, 130 Cal. 316 , 62 Pac. 559 , 80 Am. St. Rep. 127 . Under the decree of the District Court there is no danger that creditors of the San Diego Association may be defrauded, for when the stores are returned, creditors of the stores will naturally look for pay-' ment by the stores returned, and will govern their action accordingly. Our judgment is that the court was correct, and that the decree should be affirmed. Affirmed.